February 3, 2024

JF3439: Mastering BRRRR and Tech-Driven Real Estate Investing ft. Saad Dar




In this episode, Joe Cornwell talks with Saad Dar, a BRRRR investor and head at Baseline. They talk about transitioning from CPA to real estate, the benefits of BRRRR in Philly, and leveraging FinTech and PropTech. They discuss the importance of market knowledge, contractor trust, and networking for investment success.

Key Takeaways:

  • Career Pivot to Real Estate Success: Saad Dar's transition from accounting to becoming a BRRRR investor and tech entrepreneur illustrates the power of aligning one's career with their passions and the innovative intersection of real estate with technology.

  • Keys to BRRRR Strategy Mastery: The episode highlights essential strategies for BRRRR success, including deep market knowledge, solid contractor partnerships, and efficient project management, especially crucial in fluctuating markets.

  • The Power of Networking in Real Estate: Saad Dar shares the importance of building strong connections within the real estate community, offering advice on how effective networking can help overcome investment challenges and unlock new opportunities.

Saad Dar | Real Estate Background

  • Head of Baselane
  • Portfolio:
    • 20+ Units, including duplexes
  • Based in: New York City
  • Say hi to him at: 
  • Best Ever Book: Multi-family Millions - by David Lindhal
  • Best Ever Advice: Relationships are the key to success.

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Joe Cornwell (00:04.694)
Best ever listeners, welcome to the best real estate investing advice ever show. I am your host, Joe Cornwell, and today I'm joined by Saad Dar. Saad is a head of business development with Baselane. Baselane is the number one banking platform for real estate investors. He's also a BRRRR investor with 20 units, mostly duplexes. He's investing in the Philly market. He is from New York City and currently based in Atlanta. It's his first time here with us. So Saad, welcome to Best Ever.

Saad Dar (00:32.25)
Thank you so much for having me, very excited.

Joe Cornwell (00:35.018)
Yeah, so why don't we start since it's your first time on the show with some of your personal background. Uh, how, where'd you, where are you from? What did you do and how did you initially get into real estate?

Saad Dar (00:46.11)
Absolutely, yeah. I'm originally from New York, recently moved to Atlanta, as you said, it's been about actually almost a year now. And my background career-wise is in accounting and finance, I'm a former CPA. I spent about four or five years doing management consulting with large corporations. The last four years of my career, I've been working in FinTech and PropTech. Baselane technically is a combination of both FinTech and PropTech, so we'll talk more about that. Where I really help the companies scale from zero

Saad Dar (01:17.944)
I started investing in real estate about five years ago, and really accidentally, which I think a lot of people get into it this way. My motivation was to generate additional rental income so I can help fund my parents' retirement. And I became a real estate investor when I didn't sell my first house and I rented it out. And so I loved it after I kind of just got into it. So my passion's been real estate investing for the last several years.

We did pause for a little bit in COVID, but after sort of the first year of COVID, we got a little bit more comfortable. And so today, like you mentioned, I focus on the BRRR strategy, and mostly in Philadelphia, where we try to do two to four unit type properties for long-term rentals, but we've been experimenting with short-terms as well, recently, but laws have changed. So I think we're switching into midterm from there. But one last thing I'll share is that when I started investing in real estate, I'm working in tech, I love technology, especially banking and financial technology, so I was extremely frustrated with that part of the sort of ecosystem in real estate, and that's one of the reasons I joined Baselane, not only to lead the business development, but partnerships to help really build that all in one platform that I want for myself, and I really strongly believe that all of us are looking forward to not only manage, but also scale our businesses. So super excited to be here to tell you more about all of that.

Joe Cornwell (02:43.638)
Yeah, so let's start with that initial property. You said that was about five years ago. It was your primary residence that you, instead of selling, you just chose to run it out.

Saad Dar (02:54.21)
Yeah, so actually I got advice from a family member who is a business owner and has probably like, you know, 15, $20 million of property. When I was about to sell that house, it was listed actually for sale in New York, and he reached out to me and said, hey, look, this is gonna go up in value. It's a really amazing area. Brooklyn is growing, don't sell. And so I kinda started looking into it, and I thought, you know, how am I gonna do this? Like, how can I manage a rental property? I have a full-time day job.

I don't know anything about this. And so, of course, I got some guidance from people that I knew, read a bunch of books, watch a bunch of, social media was not as prominent, I think, five years ago, but just got into it and started learning more. And yeah, I got it up and running. That property now today cash flows over $2,000 a month because we not only rent out the house, it's split into two units, we rent out all the different aspects of the driveway, the garage, et cetera. And so it's been five years, obviously, there's definitely the upkeep and the maintenance and all of that because of the age of the building, but it was my first foray into real estate investing and got me hooked.

Joe Cornwell (04:05.77)
Yeah, I agree with you. A lot of people do get into real estate through various means of accidental issues or can't sell a house, don't want to sell a house, choose not to, and it wasn't necessarily the plan when they purchased the property. Now, I know you mentioned you're a BRRRR investor and you switched to the Philly market, so what was your motivation for both of those?

Saad Dar (04:27.458)
At the time, I was actually in Brooklyn. When I left Brooklyn, I moved to New Jersey. So, Philly was the closest market that I found where the rent ratios were very attractive. And there were indicators that, you know, pockets of the city were growing. And we got some tips from some local real estate agents that had also invested in Philly. So, I decided to partner up with my current partner today, who was also at the Boston Consulting Group, the company that I used to work for, Management Consulting in Philly. We obviously did a lot of research on the market before we really kind of dove in and then Covid hit so we had more time to think about it but Philly was attractive because of the proximity to where we lived. It was only an hour and a half away.

Again, it was one of the sort of tier, I would say tier two or tier three cities in the country where the initial purchase price to get into a deal for new investors was much, much lower in terms of risk. And so we thought it was a good place to go and start our real estate careers so we can learn a lot more even if we make mistakes, you know, it was forgiving. That was a reason for Philly. And so today we've really gone all in on Philly and have been doing BIR there since I would early 2021.

Joe Cornwell (05:44.238)
Okay, and why the BRRRR method?

Saad Dar (05:47.966)
I always just really liked the BRRRR method. I think following your podcast and some other podcasts as well like the Bigger Pockets, it always clicked for me.

It was intuitive, I understood what the concept was, especially because you can do force appreciation. And so you have control, you can do force appreciation and do a cash out refi that gives you back a lot of the investment that you had up front. And that for me is the main motivation. So what we've done in Philly, and I think we were lucky for a couple of years because of the market conditions and the high rents and the high appraisals, we were able to often cash out more than 100% of what we put in cycle that cash within six months usually, sometimes faster, and put it into the next deal.

And so the problem of, hey, I need to raise money or I have 100K but I don't have another 100K wasn't necessarily an issue. So for me and my partner, that was the main driver for that strategy. Now there are downsides to it, right? There are trade-offs, right? It takes more time. You need to understand construction. It's more complicated. There's more risks involved. You have to manage more stakeholders, but definitely pays off if you do it the right

Joe Cornwell (06:57.598)
Yeah, couldn't agree more. As I mentioned to you in the intro, you know, I am a burn investor as well. That's been my bread and butter the last seven, eight years. And I love the strategy for the you know, like you said, recycling the capital, the velocity of the money. It has gotten more challenging over the years for various reasons. You know, with interest rates rising, it's been more difficult to know where you're going to, you know, your back end is going to be on a rehab, the value, what the bank's going to lend and what terms.

But it sounds like you've been executing these deals in the last couple of years in this kind of volatile rate market. So how have you been able to do that successfully?

Saad Dar (07:37.346)
It comes down to, I think, a couple of key things. You really have to know your market and sub-markets. I think that's step one, really. And I think having a specialty in the areas you're investing is really important and having a lot of relationships so you understand the pulse of the market there, block by block. That, to me, is key because that comes into the underwriting process.

If you make a mistake, you're gonna pay for it. And I'm not saying that we haven't made mistakes, but we've learned from that. So I think that's really the first thing is to really know the market and really go deep in the areas you're focused on and making sure you understand what the numbers look like there.

I think the second biggest, I would say, opportunity to also challenge is the rehab part. And so here, having a, I mean, I'm not in construction, and so having a strong contractor and really important contractor relationship that's built on trust and long-term partnership, that's also key. Again, we've learned there, we've made mistakes, we've been burned, but we've gotten to a place where we understand how to manage that cycle and the projects that we do, especially because we're out of state.

So that to me is the second biggest thing. And then I would say the last thing is about just project management and speed, because yes, you're gonna find the lender and figure out how to refi, and we like to do that upfront. But speed is of course really important because you need to get the refi done in a certain amount, and that can only be done when the property's leased.

And so that time to lease is really important and making sure you optimize that and making sure that the comps that you ran when you did the underwriting are still in play for that refi that you're going to do, let's say, six months later. I think those are the three really important components, which is, again, knowing the market and submarkets, really making sure that the rehab part is controlled and you have somebody who knows what they're doing when they're executing that for you and you can manage it well. Number three is speed.

Joe Cornwell (09:37.534)
Yeah, I mean, again, as a BRRRR investor and I'm local, so I have direct control over all my deals, I have my own construction company, we do almost all of our renovations totally in-house. And even with all of that Burr is far from easy. So kudos to you for being able to pull this off from, you know, remotely. So my follow-up questions in that line of thought is how are you finding these deals remotely, I guess part, you know, for, for the first question.

Saad Dar (10:04.586)
Yeah, I think we have a couple of different channels. We've gone and kind of built a bunch of relationships with a couple of real estate agents and brokers, but also wholesalers in the area. Those are the primary channels through which we find deals. I think once you put your name out there, you start getting deals and really too many to look at. Most of them obviously numbers don't work, but that's really been the key for us. I think we try to focus on narrowing down the number of deals we do every year.

But having this open communication back and forth with people that are bringing you deals, I don't like to ignore them. I like to make sure we give them some response if we're active and looking to make sure they understand the feedback if something doesn't work. Hey, I don't really need this. I want something else. I want it in this area, not over here, for example. And so those have been some of the primary ways that we've done that. And so I generally find that we're actually usually behind because it's not necessarily that the deals are not out there don't have the capacity, sometimes, to even handle looking at all the deals that we might be getting inbound.

I would definitely say that the last year or so, it's been much harder and tougher to make the numbers work. There's been many deals that we've looked at and tried to run the numbers with the lender, trying to figure out if it can work. Like you said, with the higher inflation, higher cost of interest, as well as labor costs going up, inflation has not only material cost, but also labor costs going up significantly construction is also more expensive. I would say probably still 30, 40% even today. Those do factor in, it's made it harder to do deals.

Joe Cornwell (11:45.022)
Yeah, no doubt, especially, you know, like you said on a bird, you're trying to hit a moving target on the back end and that is already hard enough to underwrite with consistency in the market and in the volatile state we've been in the last 18 months, it's been even more challenging. So you said you worked remotely with these contractors, how did you find the contractors you ended up partnering with on these deals? What is that relationship like? Are you using the same ones for all of these? Tell us a little bit more about that.

Saad Dar (12:11.626)
I'm a bit of an extrovert, so I end up meeting a lot of people and talking to different folks. That's part of the reason with Baselane I'm head of business development and partnerships because that's naturally what I do. In the Philly market, I've met with different lenders, with different brokers, with different property managers as well, wholesalers. I always keep in touch, try to help people where I can, ask for help where we need help.

In the beginning, it was through one or two wholesalers that were larger and getting some references. Eventually, I think it was just through some other relationships I had. We worked with two contractors primarily since then. Actually one of them, I met through a wholesaler, it was his uncle in New York, and we convinced him to come to Philly and start working with us because he was also interested in rental properties, wanted to learn the business. He wanted to watch how we did it, and he built sort of a satellite office team for us.

And that worked out pretty well for the last few years. So that's been the play right now, but as we graduate up, we're actually looking to formulate new partnerships with some folks that are more experienced and more local. And so again, that's coming from a couple of real estate agent and other relationships we have, like talking to people, having coffee chats, and seeing if we want to work with them.

Joe Cornwell (13:16.119)

Yeah, so for your personal investment portfolio, what are your goals for 2024 and beyond?

Saad Dar (13:41.902)
Yeah, one of the things I think right now, and I like to be realistic, is that things have been very unstable as of last year. So we are definitely trying to stabilize our portfolio. And what that really means is, we set up a bunch of systems with Baselane and all of those things that help us streamline the finances and rent collection and all that, but we still have a property manager. And so things like having the right property manager is one of our priorities for us for this year. So that's a big thing. We wanna stabilize the portfolio.

We've been ready to kind of think a little bit bigger as we now get into this year, expecting rates to come down a bit. Not sure exactly how much, but we think there will be a correction. Our goal is to kind of consolidate all of our resources and cash and try to do one larger deal, something that is 10, 12, 16 units. Instead of doing like four projects, we want to do one project really well, go deep with an experienced GC and in the right areas in Philly.

Joe Cornwell (14:43.434)
And now in the Philly market, and I'm completely unfamiliar with it, what are you paying per door there? I mean, how is value there compared to like, other similar metros?

Saad Dar (14:55.333)

It depends on the, definitely the, obviously like the area of the city, because it can be different block by block, even in nicer neighborhoods. I can give you an example, maybe a one or two deals, if that helps. One of the deals, and it definitely isn't like a C area, a little bit rougher area that's kind of up and coming closer to some main roads and transportation, but when we purchased it, you know, it was definitely a little bit on that, on the C side, maybe even C minus.

We bought two buildings that ended up becoming, they were both single family, but they ended up becoming duplexes. So we converted it from two single family into a duplex, each of four total units. We bought that through wholesale with squatters in the property for 80K, and we did cash for keys, get the squatters out, and we renovated it for a total of about 205, 210K, both of them. So we were all in at about 285, 290. We appraised at about 515 altogether for those, and we did a cash out, I think it was a 68, 70% LTV. So we got about 350K out of that deal, which was, I think, about 65, $70,000 more than we had put in. And that cash flows after mortgage and insurance, et cetera, about $1,300 across those four units. So, you know, something like 350 a door.

Joe Cornwell (16:30.538)
Yeah, no, that's great. And now on a deal like that, how are you structuring it? Are you using your own cash? Are you using construction loans? Are you using private money on the front end?

Saad Dar (16:42.982)
For a deal with this size, we were using pretty much all cash to fund the deal. And again, with the BRRRR method, because we've been kind of trading up deal by deal, accumulating more cash as we go and rental income, we're able to do that.

And there's another deal that we're doing right now, which is a different kind of setup, which is a large house that's being converted into six sort of suites, more of a midterm type play on that one. That's a little bit different. Again, all cash for about $220 to purchase. The rehab's about $170. So we're going to be in the $400 range for all in, and we're expecting to appraise north of $450, $500, something like that. And cash flows about four, you know, revenue should be about $4.5, net cash we have to see exactly where we land. For that one, again, all cash, but we are planning to do a cash out refi again, something in the 65 to 70 range. When we started, we used to do a much higher LTV cash out because we just wanted the cash in hand. Now we're getting a little bit more conservative with the market conditions and doing something like 60, 65%. So the overblended exposure that we have is less to debt.

Joe Cornwell (17:55.742)
Okay, that makes sense. And you know, with seven to 8% rates as they have been, I'm sure having that lower LTV is helping on the cashflow as well.

Saad Dar (18:04.879)

Joe Cornwell (18:06.23)
So, and now again, all of these deals, you've been basically rolling up your bankroll, so to speak, as you continue refining these and trading up and getting your capital back. Are you raising any money for these deals or is it just strictly you and your partner?

Saad Dar (18:22.038)
At the moment, we have not raised any money. We have definitely used some private and hard money in certain deals where for construction loan or things like that, we were using that kind of debt.

I think as we get into the bigger deals, like I've been telling you about, we are planning to use more financing, more local financing, not just for the purchase, but also for the construction costs. And so definitely as we scale up, we're going to be using financing more. In terms of just raising capital, that's part of the plans, but we wanted to kind of prove our model first and make sure that we feel confident in the numbers and we're delivering and we have all the systems set up the right way before we take on other people's money.

Joe Cornwell (19:03.242)
Yeah, that's great strategy for sure. So switching gears a little bit, tell me about Baselane and why we should know about it.

Saad Dar (19:12.814)
Yeah, I'm glad you asked. As I mentioned, I started investing about five years ago and I got very frustrated with the tech side of things and the property management side of things. I'm sure most people do because it becomes so time consuming, especially with a family, with a day job, right? And it gets very stressful. And so on top of all of that, you know, I have the financial background, but just dealing with spreadsheets, multiple bank accounts, all these different processes, there's a lot of manual work that just eats up your time. And so, you know, kind of a background story is when I first met the founders of Baselane, when they told me about their vision to build this all-in-one modern banking platform, that was really going to provide all these products and services that somebody like me or you or other people like us need to run our businesses, I had this big aha moment and I immediately decided to join the company.

So today, Baselane is the number one banking platform. The most important part of it is tailor-made for real estate investors. So it's kind of in the verticalized banking section of the fintech slash prop tech space. And Baselane offers a business checking account. Most people kind of wonder, why are you talking about banks, bank account, so why do I need another one? The idea behind this is like all of your money moves through your bank, right, in and out, debits and credits. And so if we can design a bank that's tailor-made for you as the investor, whether you're a commercial investor, a residential investor, Airbnb host, midterm rental, whatever, you have features inside of that, things like virtual accounts and virtual cards, for example, and the high rewards that really help you organize better as an investor that you can organize things the way you have your pro forma.

For example, we all project vacancy, we all project maintenance reserve, but do you have that money actually set aside? I bet you most investors would say no. It's just in the regular operational funds. Are you properly allocating your security deposits? Most people are probably not doing that either. And so the idea is with these virtual accounts and cards, you can get better organized because our technology at Basin allows you to set these rules so you can auto-tax properties and auto tax certain types of expenses. And that really is the idea behind this is to kind of try to set this on autopilot so as you are spending money or earning and collecting rent or earning revenue, you're able to do sort of the bookkeeping along the way. And for me, that's more powerful because most investors that enter this space do not make it out of the one to four unit level, right? Most people start with this big lofty goal of financial freedom and they get into rentals, never make it out of the one to four and they never scale.

And so our goal is to help make it so that it's easier for you to organize and analyze how you're doing, so you can actually do the next deal, and the next deal, and the next deal, and you can keep going. So we've got our own bookkeeping software that helps you with that, our own analytics that we build, and our reporting financial statements. So on any given day, if you're doing the bookkeeping, and you're setting up all these rules, you can see how you're performing. You can pull up any property, any unit, and see what happened that week, that month.

And so that's really the power of Baselane. And on top of all of that, we've built property management features. So online rent collection, lease creation, and e-sign, building a lot more like tenant screening and things like that as well. So the idea is to really make it a one-stop shop for investors so that you can run your real estate business on the platform. And so, yeah, I'm a super user of Baselane. It's one of my favorite aspects of real estate now. I can love logging in and kind of nerding out over the performance and the numbers. And

Saad Dar (22:55.15)
Yeah, that's the exciting part is really giving the information and data back to people.

Joe Cornwell (23:01.09)
Very cool, I'll have to check it out. So a new segment we are doing on the show this week is a kind of a deep dive into one of your superpowers or traits or strategies that you use in your investing business. So what would you consider your superpower?

Saad Dar (23:20.022)
My superpower is probably connecting with people. I like to meet people, I'm open, try not to judge people too much, hopefully, and be, you know, unbiased. And so I like to meet people, build those relationships. I think in this business, that is the key, because I certainly don't know a lot of things, and I always like to learn, and I think there's so many people out there that have a lot more to teach somebody like myself.

And I think we can help each other, right? I think if we can help each other with whatever's going on, it really does show up at some point in your life and in your investing career. So for me, that is always the focus, is to treat people nicely, like be fair, and treat them with respect, but also really like try to help them if I can. And I think if I continue following that, it pays dividends.

Joe Cornwell (24:12.77)
So for the audience who's listening to this, maybe they are more introverted or they have trouble connecting with new people, networking, building relationships, all the things you just mentioned. What would your advice be to them? How are you going about that? And what would your advice be to them?

Saad Dar (24:28.198)
You know, I'll tell you a story. One of my friends is starting to get into real estate. He's a doctor, right? And so he's very introverted. He's not like myself, like just able to walk into a bar or a restaurant and say, hey, like, who are you? Like, I wanna talk to you. And so he's about to do his first flip with one of his family members. And I introduced him to a lender over email, but it took him like four days and just no response.

And I was talking to him like, hey, like, you know, Robert's really experienced, you should talk to him, he can really help you out, build a relationship. But he didn't understand first, like the value of that conversation. He was like, well, I don't really need the debt right now, I have cash, I'm good for now. But he wasn't thinking ahead. And so I think one thing is that we have to understand the value of whatever this is. Those relationships, how they can help other people, which is like just good karma for you, and how that can help you, that's number one.

And then number two, I always like to say like, a little bit uncomfortable. We have to be able to go into a zone that is not comfortable, right? Like being on your couch at home is comfortable. Being out, having a coffee chat with somebody, a stranger you don't know, is uncomfortable. But in this business, really any business, I think you have to be a little bit uncomfortable because that's where change happens, that's where the magic is. And so you have to set a goal and push yourself. And obviously if you wanna figure out like the tactical stuff of how do I even do this, there's a lot of, I think, content out there, but I think we would keep it simple. I think if you just...

I would say just ask people out on a coffee chat. Take them for a coffee chat, buy them a coffee, 15, 20 minutes, hey, I just wanna ask you a few questions. Very simple, it can be one-on-one in a private setting, so if you're not comfortable with larger groups or open forums and conferences, try to do one-on-ones, make it more focused and personalized and really appreciate the time you're getting. And if you try that four or five times, you'll start to understand the value, but also you'll get a little bit better at, how do I ask questions? What do I even talk about when I get there? If you don't, hit me up on LinkedIn. I'm happy to help you out with some tips on that.

Joe Cornwell (26:27.562)
Yeah, that's great advice and something you mentioned I like, you know, that the analogy is kind of like planting the seeds today, you know, for the fruits tomorrow. And I think that's important with networking relationships. I mean, almost anything we do, especially when it comes to business and real estate, you know, I started going to meet up seven, eight years ago, and now I've become very good friends with, with some of these people I met, you know, all those years ago, I've had partnerships on deals. I've done private money, you know, all of the things that happen when you build relationships and you know, it's not.

I don't think you go about it in a way of like, oh, if I go and meet 10 people, there's going to be so many people that I can find something of use from. It's like you just genuinely be a normal good person, try to make genuine connections with people, try to add value, as you mentioned, and all of that is reciprocated and as time goes on, you build genuine relationships, good things happen, and again, you're just pointing the seeds for future. So, I couldn't agree more. I appreciate you sharing that, your superpower with us. Are you ready to head over to the best ever lightning round?

Saad Dar (27:33.328)
Let's do it.

Joe Cornwell (27:34.454)
What is your best ever book recommendation?

Saad Dar (27:38.202)
I've been thinking about this one actually ahead of the show, so I would say Think Fast, Think Slow. It's by Daniel Kahneman, and I really come back to this book almost now, often every couple of weeks, just thinking about employing it and the ways that I'm doing things. So I would recommend that.

Joe Cornwell (27:57.122)
Best ever way you like to give back.

Saad Dar (28:01.126)
I usually donate through my local mosque or charity that's a little bit more local. The other way is I like to also just give my time to folks that are looking for career advice, professional training, resume reviews, just locally in my community. That's another one of my passions.

Joe Cornwell (28:22.314)
Okay, give me a mistake you made on one of your deals and the lesson you learned from it.

Saad Dar (28:27.81)
We underwrote a property that we took too long to finish and we lost the appraisal window. So we got hit on the appraisal. It was much lower than we planned for. And the way we mitigate that now is managing the time and speed of the rehab, but also having some scenario planning for scenario ABC on what the appraisal might be. So underwriting a little bit more conservatively.

Joe Cornwell (28:53.342)
Yeah, no, that's a definitely an aspect of bird you have to be aware of and I've had that happen as well so can relate to that one. So I appreciate you joining us. Where can people connect with you and learn more about your business and Baselane?

Saad Dar (29:08.794)
You can go to www.baselane.com with the L-A-N-E, so baselane.com, and then if you want to reach out to me, find me on LinkedIn and send me a connection request, send me a message, I'm happy to chat.

Joe Cornwell (29:21.702)
Also, we'll be sure to link to those in the show notes as well. I really appreciate your time joining us today. Listeners, if you got value from today's show, please leave us a five-star review. Make sure you're following us on social media. Sod again, thank you for your time and thank you for joining us.

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